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Counting the Cost

If I ran a hotel, I could likely fill it every night be charging just £5 per room. And whilst the place might be busy – and give the impression of a successful business – if the rooms cost me £12 to service (in terms of cleaning / lighting / heating etc) then I would actually be losing £7 per room per night. Imagine I have 20 bedrooms and that’s a loss of £140 per night or almost £1000 per week.

You’re probably reading this and thinking ‘who would be so stupid?’! But you would be amazed at the number of businesses I come across who operate their company this way. Usually because of one of two reasons:

a. They don’t know their numbers

b. They don’t calculate their time

When it comes to ethical marketing, I believe this is one of the most crucial items a marketer need to understand about your business. (There are many consultants who won’t ask the figures because that holds them accountable and some believe marketing is more ‘art’ than ‘science’. I’m afraid I disagree.)

Perhaps I can illustrate with a story:

When we were visiting the Pyramids in Egypt, we were warned about the local traders at the site who constantly try to ‘rip off’ the tourists. The Egyptian who told us this said that whilst he loved his countrymen, the people who worked the Pyramids were a different breed and would happily take tourists’ money by whatever means they could. So, he told us to barter – and to barter hard – if we did want to buy their wares. He informed us that no trader would sell an item if they weren’t going to make any money – they simply wouldn’t do it. They would lose the sale – and keep the potential profit for the next tourist.

What a great lesson – they wouldn’t make the sale if they were going to lose money. They knew their break-even – the minimum they could accept and still walk away with profit. I wish we could learn from these traders and all know these figures for our businesses – there would be far fewer business closures with just this simple piece of data.